$458M Big Dig Settlement Reached; Criminal Charges Dropped

By | January 23, 2008

The main management consultant and contractor on Boston’s $15 billion Central Artery/Tunnel Project (Big Dig) has agreed to pay more than $407 million to resolve civil and criminal liabilities in connection with the partial ceiling collapse and other defects in the project.

While erasing all criminal charges, the agreement with state and federal authorities does not release the joint management firm, Bechtel/Parsons Brinckerhoff, from liability for any future catastrophic events, if any occur within the next 10 years.

In the agreement, the joint firm acknowledges serious failures in its management of the major construction project.

The agreement also calls for an additional $51 million to cover costs of other construction flaws. This sum will be paid to the state by 24 other design contractors ($11.1 million) who worked on the project and their insurers ($40 million from owner-controlled program), bringing the total recovery to $458.2 million.

U.S. Attorney Michael J. Sullivan said that the public entrusted Bechtel/Parsons Brinckerhoff “to be their eyes and ears” on the project but that the firm “grossly failed to meet its obligations.”

He said figuring in this settlement, Bechtel/Parsons Brinckerhoff lost money on its Big Dig contract since the settlement is about three times the $150 million profit that his office estimates it made on the project. “They lost money because of failures that occurred on their watch,” he said.

Massachusetts Attorney General Martha Coakley, who inherited the investigation from her predecessor a year ago when she assumed office, called the agreement the “best possible but not perfect resolution for the Commonwealth and for the federal government at this time.”

She said officials believe they had enough information to proceed with criminal charges against the consultants but that the penalty against a corporation for manslaughter under state law would have only been $1,000 had they gone that route.

Coakley said most of the funds are coming from the companies themselves and their directors, and only some is coming from insurers, which the government officials considered important when making the deal. Sullivan estimated that about $30 million is coming from insurers.

The deal does not necessarily end the government’s recovery efforts. If a future catastrophic event relating to the Big Dig causes more than $50 million in damages, the federal and state governments retain the right to sue Bechtel and Parsons Brinckerhoff. Damages are capped at $100 million per event. For the next 10 years (through October 2017), Bechtel and Parsons Brinckerhoff waive their right to statute of limitations and other time-based procedural defenses to a catastrophic event claim.

Bechtel/Parsons Brinckerhoff, which was paid more than $2 billion to manage the project, is not barred by the settlement from obtaining future government contracts, as some critics had urged.

The Big Dig is recognized as one of the biggest and most complex engineering undertakings in modern times. In 2002, the risk manager for the Big Dig described the project as larger than the Panama Canal or the Alaskan pipeline, more complex than the Hong Kong Airport (which involved land reclamation) and more expensive than the Chunnel connecting France and England underwater.

Officials said that the majority of the total $458.2 million will be held in a new state Central Artery/Tunnel Project Repair and Maintenance Trust Fund to provide for future non-routine repairs and maintenance of the Big Dig. Any future recoveries from Big Dig contractors will also be deposited into this fund.

The actual breakdown of the $458.2 million monies being paid shows Bechtel will pay $357.1 million; Parsons Brinckerhoff, $$50 million; the Owner-Controlled Insurance Program, $40 million; and section design consultants, $11.1 million.

The Big Dig repair and maintenance trust fund will get $414.9 million of the funds; the federal government, $23.5 million; a statewide road, bridge and infrastructure fund, $17 million; the city of Boston, $1.8 million; the Massachusetts Turnpike Authority, $700,000; the MBTA subway system, $142,000; and an unknown whistleblower, $150,000.

The agreement brings the total payments for cost recoveries related to the Big Dig to more than $500 million.

The investigation that led to this agreement was begun after there was a breach in a slurry wall panel in the I-93 mainline tunnel in September 2004.

The financial settlement means Bechtel/Parsons Brinckerhoff will not face criminal charges in the deadly ceiling collapse in July 2006 that cost Milena Del Valle of Boston her life. The Del Valle family has filed its own lawsuit since that tragedy.

But the agreement does incorporate a statement of facts detailing the basis for liability by Bechtel/Parsons Brinckerhoff, which oversaw the project for more than 20 years, in four different areas.

First, Bechtel/Parsons Brinckerhoff has acknowledged serious failures in its obligations to manage construction of the I-93 slurry walls. Particularly, Bechtel/Parsons Brinckerhoff allowed construction contractors, such as Modern Continental Construction, to place concrete for the slurry walls when construction specifications had not been met. Bechtel/Parsons Brinckerhoff failed to complete the required documentation noting these construction deficiencies and failed to have the deficiencies corrected.

Second, Bechtel/Parsons Brinckerhoff has acknowledged certain failures regarding its oversight responsibilities concerning the construction of the ceiling in the portal area of the I-90 Connector Tunnel. Bechtel/Parsons Brinckerhoff observed epoxy bolts that were failing to withstand the load of the ceiling panels and were creeping out of the roof, but failed to adequately investigate the cause of such failures or to correct the problem.

Third, Bechtel/Parsons Brinckerhoff also acknowledges its failure to adequately fulfill its construction management obligations relating to contract modifications. Particularly, Bechtel/Parsons Brinckerhoff failed to assure the accuracy of contractors’ records on time and material slips thereby resulting in overpayments to be made to contractors who misrepresented the classification of apprentice workers as journeymen who were paid at higher rates.

Fourth, Bechtel/Parsons Brinckerhoff has acknowledged its failure to meet its oversight obligations with respect to the delivery and use of non-specification in concrete Big Dig structures including the I-93 mainline tunnel slurry walls by Aggregate Industries Northeast Region, Inc.

“Today’s settlement with Bechtel/Parsons Brinckerhoff is continuing evidence of our commitment to vigorously investigate and prosecute those who have perpetrated a fraud on American taxpayers. It is critically important that federal and state tax dollars needed to fund important public works projects, like the Big Dig, are safeguarded against waste, fraud and corruption,” U.S. Attorney Sullivan said.

Coakley said the agreement required unprecedented cooperation among state and federal agencies.

“All the while, we have been ever mindful that Milena Del Valle lost her life on July 10, 2006. Today’s landmark agreement with Bechtel, Parsons Brinkerhoff and other contractors allows us to resolve criminal and civil claims, to provide for future repairs, and to ensure the future safety of the Big Dig tunnels,” Coakley said.

John MacDonald, chairman of the Bechtel/Parsons Brinckerhoff joint venture, acknowledged the agreement in a statement, in which said that “[p]rotracted legal proceedings would have served no one well, and we believe that this resolution is in the interests of all concerned.”

He said his firm takes responsibility for its work. “We understand and acknowledge with this resolution that our performance did not meet our commitment to the public or our own expectations. Above all, we deeply regret the tragic death of Milena Del Valle in the I-90 tunnel,” he said.

Under additional terms of the settlement, Bechtel and Parsons Brinckerhoff are required to enact corporate compliance programs to prevent any similar conduct from occurring on future public construction projects.

The firm must also conduct an internal investigation and report if it finds any construction defects that might lead to the type of catastrophe that occurred in 2006 when part of the ceiling collapsed in the I-90 Connector Tunnel and killed Del Valle. Bechtel/Parsons Brinckerhoff has 180 days to submit that report.

The case was handled by Assistant U.S. Attorneys Fred M. Wyshak, Jr., Jeffrey M. Cohen, Anthony E. Fuller and Eugenia M. Carris of Sullivan’s Public Corruption Unit as well as by Special Assistant Attorney General Paul Ware and more than a dozen attorneys and other staff from the Massachusetts Attorney General’s Office.

The case was investigated by the New England Regional Office of the U.S. Department of Transportation, Office of Inspector General, the Federal Bureau of Investigation, New England Field Division, as well as the Massachusetts State Police assigned to the Attorney General’s Office.

PDF chart illustrating where the funds originated and where the funds will be distributed:
Settlement Funds chart (PDF)

One-page summary outlining the Big Dig Global Agreement:
Big Dig Summary (PDF)

Press conference audio from January 23, 2008:
Big Dig Global Agreement Press Conference (MP3)
Sources: U.S. Attorneys Office
Massachusetts Attorney General

Topics USA Fraud Massachusetts Contractors Construction

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